Wealthsimple’s new banking and cryptocurrency initiatives
In the past month, Wealthsimple has been successful in acquiring two licenses that allow them to operate as a Money Service Business. These licenses give the impression that the company has active and developing ambitions in the cryptocurrency space as well as in the banking industry. In order to accomplish these goals, Wealthsimple has recently established two new subsidiaries: Wealthsimple Digital Assets and Wealthsimple Payments.
Consumer fintech companies that want to operate in Canada and gain access to the electronic funds transfer network can do so by obtaining a license known as a Money Service Business (MSB). An MSB license has been obtained by the locally founded startup Koho, the British company Revolut, and the American company TransferWise.
Additionally, dealing in currency conversions is permitted by the license. For instance, thanks to this license, Revolut is able to issue Visa debit cards to residents of Canada. These cards give cardholders the ability to store balances in multiple currencies and convert between them as needed. In addition, in order to provide customers with a service that comes even closer to that of a bank account, Koho leverages the deposit-taking license held by the People’s Trust Company.
The main disadvantage of an MSB license, as far as I can tell, is the inability to deal with cheques. The fact that it is very simple to obtain a license is the primary benefit. FINTRAC is the regulatory body, and its primary concern is preventing the laundering of illicit funds.
This is the first shot fired in Wealthsimple’s battle against services comparable to those offered by banks. That new subsidiary is called Wealthsimple Payments and is licensed both for money transfers and forex. My hunch is that they are putting the finishing touches on a debit card product that supports multiple currencies.
It’s a perfect match for their target demographic, which consists of wealthy millennials who travel the world and work in the coffee industry. How can a company like Wealthsimple, which places a strong emphasis on design and is also well-versed in psychology, ignore the growing popularity of hip debit and credit cards (like Apple’s white card or Koho’s metal card)?
The fact that Koho charges $159 for its metal card is, without a doubt, a financially savvy move for its customers. When you use your card, you are engaging with the brand that issued it and thinking about the company that did so. (Well, not if it’s Manulife, but if it’s Apple or Wealthsimple, it reinforces your positive feelings towards the brand).
The following are some of the beliefs that are strengthened by this piece of information: 1) That the competition to become the “One Financial Bundle to Rule Over Money” is the most important thing. 2) That the United Kingdom and the United States markets are an afterthought for Wealthsimple because of the pressing need to bundle.
That Wealthsimple and Koho, two companies with significant backing from Power, are headed for a head-on collision. Both are focused on expanding their customer bases, while simultaneously expanding the range of services they offer. The fact that Koho’s CEO does not serve on Wealthsimple’s board of directors is the only meaningful difference between the two companies.
An MSB license will also be required beginning in June 2020 in order to trade in virtual currencies (also known as cryptocurrencies), and Wealthsimple has already obtained a license in advance of this requirement through a company that is called Wealthsimple Digital Assets. Both of these requirements are distinct from one another.
The fact that Wealthsimple appears to have an interest in cryptocurrencies is further evidence that Wealthsimple CEO Mike Katchen is expanding the company beyond his roots as a “boring investor.” I’m guessing that the fact that Wealthsimple caters to customers who have an interest in cryptocurrencies is one of the company’s most successful customer acquisition strategies.
It wasn’t until about ten o’clock at night on Christmas Day that I found out about this new development. I want to apologize to the hardest working PR team in financial services for any disruption that may have occurred as a result of the media’s interest in everything Wealthsimple-related. This is the phone number that is listed for contact with the new subsidiaries: (647) 746-8776. If you are interested in learning more, you are welcome to give them a call at any time. Don’t worry about the Holidays, it’s a cell phone.
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